"We continue to grind higher here," said Jason Hornett, a portfolio manager with Bissett Investment Management.
"People continue to be more and more optimistic here in North America and it definitely bodes well for the stock market."
The S&P/TSX composite index jumped 105.45 points to close at 12,613.05.
The advance came after Statistics Canada reported consumer prices rose last month at the slowest rate in 3-1/2 years — coming in below expectations at 0.4 per cent.
The lack of inflation helped push the Canadian dollar down 0.95 of a cent to 97.17 cents US as the American greenback gained strength against other major currencies. In early day trading, the loonie had dropped to 96.96 cents — the lowest it's been in more than two months.
On Wall Street, signs of strength in the U.S. economy boosted the Dow Jones industrials index by 121.18 points to 15,354.40 while the S&P 500 jumped 17 points to 1,667.47. Both closed at record highs.
The Nasdaq climbed 33.73 points to 3,498.97.
The U.S. Conference Board said its index of leading indicators gained 0.6 per cent to 95 in April, after it saw a decline of 0.2 per cent in March. The figure came in above what economists had forecast.
The index, which was buoyed by a sharp increase in applications for new homes and condos, is intended to signal economic conditions three to six months out.
The board said the index is 3.5 per cent higher at an annual rate than it was six months ago, suggesting an expansion for the economy, with the biggest risk being a drag from cuts in U.S. federal spending.
Meanwhile, the University of Michigan's consumer sentiment index was ahead to 83.7, higher than the 76.4 reported in April.
At the close, the majority of the sectors on the Toronto Stock Exchange were higher, with energy and metals leading the pack as the largest advancers.
The energy sector was up by 1.92 per cent as the June crude contract jumped 86 cents to US$96.02 a barrel. Canadian Natural Resources (TSX:CNQ) saw its shares climb more than two per cent, or 62 cents, to $30.34. Suncor Energy (TSX:SU) got a 2.59 per cent bump to $32.92 a share.
The metals group was slightly behind with a 1.88 per cent gain, as copper jumped ahead three cents to $3.32 a pound. Orbite Aluminae Inc. (TSX:ORT) saw its shares rocket up nearly 18 per cent, or 11 cents to 73 cents a share after the Montreal-based company posted a first-quarter net loss of $500,000, or 0.3 per share, shrinking its loss of $3.8 million or two cents per share in the same period a year ago.
Meanwhile, gold prices continued to pull back. June gold bullion dropped $22.20 to US$1,364.70 an ounce, its lowest level since April 15 after a two-day plunge knocked $200 off its price.
The gold sector on the TSX lost 3.25 per cent, as shares in Barrick Gold (TSX:ABX) fell by 2.75 per cent, or 54 cents to $19.07.
Hornett said as the stock markets rise, traders will no longer be eyeing gold as a good investment.
"I think that people's expectations for the economy both in North America and globally just continues to improve, so that continues to reduce risk of a any sort of meltdown which makes the gold trade less and less attractive," he said.
Meanwhile, stocks in SNC-Lavalin Group (TSX:SNC) continued to climb by 0.17 per cent, or seven cents, to $41.87 as the engineering giant defended itself against a nearly $1 million wrongful dismissal lawsuit filed by former controller Stephane Roy. SNC said it was justified in firing the former executive last year because it claims he acted illegally to help smuggle the son of Libya dictator Moammar Gadhafi to Mexico.
Bank of Montreal (TSX:BMO) shares were also up by more than one per cent, or 67 cents to $62.18 after it agreed to beef up efforts to combat money laundering after American authorities found its operations in Chicago lacking.
Note to readers: This is a corrected story. A previous version included the wrong closing price for the S&P 500.